Google in buyout talks with Indian startups and VC firms

The world's largest internet company is planning to directly invest in or acquire startups that cater to whom it refers to as next billion internet users.Madhav Chanchani&Neha Alawadhi | ET Bureau | February 15, 2017, 08:38 IST

BENGALURU|NEW DELHI: Google has begun exploratory talks with startups and venture capital investors in the country in what could lead to its first acquisition of an Indian company, according to three people directly aware of the matter. The world's largest internet company is seeking to directly invest in or acquire companies in India that cater to whom it refers to as the next billion internet users, these people said.

"Two major areas of focus for them are products for the next billion users and acqui-hires in high-tech areas," one of them said, adding that a transaction is not imminent yet. Another person, an investor, said Google is unlikely to invest in consumer-internet companies such as online retailers.

Google recently hired Seema Rao, who was a vice-president at investment bank Avendus Capital, to lead corporate development, or acquisitions and strategic investments, in India and Southeast Asia.

The online search giant dominates the domestic digital advertisement market but its next phase of growth in the country would depend on how fast India is able to improve its network infrastructure and expand its number of internet users.

Google's focus on tapping the next billion internet users, typically in India's small cities and towns, could see it making strategic investments or acquiring technology-enabled firms in the financial services, healthcare, education or mobile utilities sectors, said the people mentioned above.They declined to be identified because the talks are in very early stages.

As for the potential acqui-hires, which refers to buying a company for its employees, Google is expected to focus on companies working in areas such as cloud computing and cybersecurity, they said.

A Google India spokesperson declined to comment on the company's investment plans in India.

Google, one of the world's most-ac quisitive technology companies, has not bought a single startup in India yet. Globally, it has acquired more than 70 companies since the beginning of 2014, according to data from CB Insights. The Mountain View, California-headquartered company presently invests in domestic startups through its venture capital arm, CapitalG, which recently led a $15 million financing round in education technology startup Cuemath. Google India posted a 44% jump in turnover to Rs 5,904 crore for the year to March 2016, aided by a smartphonespowered expansion of the country's internet user base and an ecommerce boom. But India's estimated 462 million internet users are merely about 35% of its 1.3-billion population and pale against China's 731million internet users.

Even so, India accounts for the largest number of users of Google's mobile operating system Android and has become a key test market for products like YouTube Offline. The company is trying to boost internet use in India, including by providing free WiFi at certain railway stations through a collaboration with RailTel, the telecom arm of Indian Railways.

Google is training its investment focus on startups that can help it expand among low-bandwidth internet users, similar to what microblogging platform Twitter tried to do with its acquisition of missed call marketing platform ZipDial in 2015, said a third person aware of Google's investment plans for India.

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